BANKING…A Placement Perspective

Banking: An Introduction:

 Starting in 1786 with the establishment of the Bank of Bengal in Calcutta

 The Bank of Bengal (established in 1809)
 The Bank of Bombay (established in 1840)
 The Bank of Madras (established in 1843)
 In 1865, the Allahabad Bank was established with purely Indian shareholders
 Punjab National Bank came into being in 1895
 Between 1906 and 1913, other banks like Bank of India, Central Bank of India,
Bank of Baroda, Canara Bank, Indian Bank, and Bank of Mysore were set up.
 In 1921, the three Presidency banks were amalgamated to form the Imperial Bank
of India,
 State Bank of India (SBI) was constituted in 1955. Subsequently in 1959, the State
Bank of India (subsidiary bank) Act
 1969, 14 of the major private sector banks were nationalized.
 This was followed by the nationalization of another six private banks in 1980
 NBFCs are required to register with RBI in terms of the Reserve Bank of India
(Amendment) Act, 1997.
 All NBFCs together currently account for around nine percent of assets of the
total financial system.
 Scheduled banks comprise scheduled commercial banks and scheduled
cooperative banks. Scheduled commercial banks form the bedrock of the Indian
financial system, currently accounting for more than three-fourths of all financial
institutions.
 Scheduled banks in India are those that are listed in the Second Schedule of the
Reserve Bank of India Act, 1934. RBI includes only those banks in this schedule
which satisfy the criteria as laid down vide section 42 (6) (a) of the Act.
 Total number of RRBs to 86 as on March 31, 2009.
 As at the end March, 2009 there were 7 new private sector banks and 15 old
private sector banks operating in India.
 There were 32 Foreign Banks in India as on June 2009.
 The process of deregulation of interest rates started in April 1992. Until then, all
interest rates were regulated; that is, they were fixed by the RBI.
 Deposit Insurance and Credit Guarantee Corporation of India (DICGC), which
was established with funding from the Reserve Bank of India. The scheme is
subject to certain limits and conditions. DICGC is wholly-owned subsidiary of the
RBI.
 Principles of Lending:
 Safety
 Liquidity
 Profitability
 Risk Diversification

Mahendra K Patidar / PGDM BIF / 017 / IPE HYD Page 1

 BANKING…A Placement Perspective

 It may be noted that the Section 21A of the BR Act provides that the rate of
interest charged by a bank shall not be reopened by any court on the ground that
the rate of interest charged is excessive.
 A bank's BPLR is the interest rate to be charged to its best clients; that is, clients
with the lowest credit risk.
 Banks utilize the Securitization and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 (SARFAESI) as an effective tool for
NPA recovery.
 At Present SLR is 25%.
 The Bank Rate is determined by the RBI from time to time. It is the rate at which
the RBI lends to the banks, and should not be confused with the repo rate, which
is the lending rate the RBI uses in the daily repo (repurchase) markets.
 RTGS: Real Time Gross Settlement
 NEFT: National Electronic Fund Transfer introduced in Nov’2009
 PFRDA: Pension Fund Regulatory and Development Authority
 February 2006, RBI set up the Banking Codes and Standards Board of India
(BCSBI)
 The Banking Ombudsman Scheme was introduced under Section 35 A of the
Banking Regulation Act (BR Act), 1949 with effect from 1995.
 BCSBI: Banking Codes and Standard Board of India

Some Important Abbreviations:

 RBI : Reserve Bank of India

 SEBI : Securities and Exchange Board of India
 AMFI : Association of Mutual Funds of India
 NSDL : National Securities Depository Ltd
 CDSL : Central Depository Services (India) Ltd
 STCI : Securities Trading Corporation of India Ltd
 SBI-DFHI : State Bank of India-Discount and Finance House of India
 CRISIL : Credit Rating and Information Services of India Ltd
 ICRA : Investment Information and Credit Agency
 CARE : Credit Analysis and Research Limited
 ARCIL : Asset Reconstruction Company of India Limited
 ARC : Asset Reconstruction Company
 EXIM Bank : Export Import Bank
 SHCIL : Stock Holding Corporation of India Limited
 FMC(Related to commodity trading) : Forward Market Commission
 BSE : Bombay Stock Exchange
Mahendra K Patidar / PGDM BIF / 017 / IPE HYD Page 2
 BANKING…A Placement Perspective

 NSE : National Stock Exchange

 RRBs : Regional Rural Banks
 ECGC : Export Credit Guarantee Corporation of India
 DICGC : Deposit Insurance and Credit Guarantee Corporation
 LIC : Life Insurance Corporation
 GIC : General Insurance Corporation
 NABARD : National Bank for Agriculture Development
 NHB : National Housing Board
 SBI : State Bank of India
 SFCs : State Finance Corporations
 IRDA : Insurance Regulatory and Development Authority
 IDFC : The Infrastructure Development Finance Company Limited
 ILFS : Infrastructure Leasing & Financial Services Limited

Write the difference between…

 Money Market & Capital Market

 REPO & Reserve REPO
 Stock Market & Wholesale Debt Market
 Mixed Banking & Universal Banking
 Commercial Banking, Development Banking & Investment Banking
 CRR & SLR
 Bank Rate & Bank Interest Rate
 RBI & SEBI
 Mutual Fund & Asset Management Company
 Intermediation & Disintermediation
 Call Money Market & Treasury Bill Market
 M1 & M2
 Demand & Time Liabilities
 Fixed Rate & Floating Rate
 ADR & GDR
 One way & Two way Fungibility
 LIBOR & MIBOR
 Open Market Operation & Selective Credit Control
 New & Old Private Sector Commercial Banks
 Scheduled & Non-Scheduled Banks
Mahendra K Patidar / PGDM BIF / 017 / IPE HYD Page 3
 BANKING…A Placement Perspective

 RRBs & Co-operative Banks

 Lien & Set-off
 Right to set-off & Right to Appropriation
 Attachment Order & Garnishee Order
 Order Nisi & Order Absolute
 General Crossing & Special Crossing
 Account Payee Crossing & Not Negotiable Crossing
 Holder & Holder in Due Course
 Bill of Exchange & Cheque
 Paying Banker & Collecting Banker
 Bank Note & Promissory Note
 Endorsement in Blank & Endorsement in Full
 Bearer & Order
 Dematerialization & Re-materialization
 Debit Card, Credit Card & Smart Card
 Online & Off-line ATMs
 Mandate & Power of Attorney
 Stale & Post Dated Cheque

Important Regulatory Bodies/Controllers?

 Money Market : RBI

 T-Bill Market : RBI
 Capital Market : SEBI
 Mutual Funds : RBI & SEBI
 Bond Market : SEBI
 Commodity Market : FMC
 HFCs : NHB
 Asset Reconstruction Companies (ARCs) : SEBI
 Insurance Market : IRDA
 Venture Capital Funds : SEBI
 Rating Agencies : SEBI
 Capital Market Intermediaries : SEBI
 Foreign Exchange Market : RBI
 REPO & Reverse REPO Market : RBI
 ADR & GDR issues of Indian Companies : RBI
Mahendra K Patidar / PGDM BIF / 017 / IPE HYD Page 4
 BANKING…A Placement Perspective

 External Commercial Borrowings (ECBs) : RBI

 Pension Fund Market : PFRDA
 Hedge Funds : No Regulator
 Private Equity Funds : SEBI
 Universal Banks : RBI & SEBI
 Depository Organizations like NSDL : SEBI
 Foreign Banks : RBI
 Foreign Direct Investments : RBI & FICB (Foreign Investment Control
Board)
 Portfolio Investments of Foreign Funds : RBI & SEBI
 Bank housing loan Market : RBI
 NBFCs : RBI
 Development Finance Institutions like IFCI, TFCI etc : RBI
 Banks Investment in Share Market : RBI

Some Facts:

 RBI Governor: Dr Duvvuri Subbarao

 RBI Established on 1 Apr 1935 under an act of parliament
 RBI Main Functions:
 Monetary Authority
 Regulator and Supervisor of Financial Sector
 Issuer of Currency
 Manager of Foreign Currency
 Current Policy Rates:
 Bank Rate: 6.00 %
 Repo Rate: 6.00 %
 Reverse Repo Rate: 5.00 %
 Current Reserve Ratios:
 CRR: 6.00 %
 SLR: 25.00 %
 Current Lending/ Deposit Rates:
 Base Rate: 07.50 %- 08.00 %
 Saving Bank Rate: 03.50 %
Mahendra K Patidar / PGDM BIF / 017 / IPE HYD Page 5
 BANKING…A Placement Perspective

 Deposit Rate: 06.00 % - 07.30 %

 India’s external debt, as at end-June 2010, was placed at US$ 273.1 billion
 The share of commercial borrowings stood highest at 27.3 per cent as at end-
June 2010
 Commercial Paper: Commercial Paper (CP) is an unsecured money market
instrument issued in the form of a promissory note, introduced in 1990.
 Banking Ombudsman Scheme: The Banking Ombudsman Scheme enables
an expeditious and inexpensive forum to bank customers for resolution of
complaints relating to certain services rendered by banks. The Banking
Ombudsman Scheme is introduced under Section 35 A of the Banking Regulation
Act, 1949 by RBI with effect from 1995.
 Banking Ombudsman: The Banking Ombudsman is a senior official appointed
by the Reserve Bank of India to redress customer complaints against deficiency in
certain banking services.
 Indian Bank Association: The Indian Banks' Association (IBA) was formed
on the 26th September 1946 with 22 members. As on 31st August 2010 IBA has
160 members.
 IBA Chairman : Mr OP Bhatt
 Finance Minister: Mr Pranab Mukharjee
 First Finance Minister of independent India: Mr R K Shanmukhan Chetty
 Banking Minister: Mr Namo Narain Meena
 The Security Printing & Minting Corporation of India Limited (SPMCIL) has nine
Units across India.
 Commerce and Industry Minister: Mr Anand Sharma
 Heavy Industries and Public Enterprise Minister: Mr Vilasrao Deshmukh
 Primary Functions of Commercial Banks:
 Accepting of Deposits:
 Savings Deposits
 Fixed Deposits
 Current Deposits
 Lending of Money:
 Loan
 Cash Credit
 Overdraft
 Discounting and Purchasing of Bills
 Banking Systems:

Mahendra K Patidar / PGDM BIF / 017 / IPE HYD Page 6

 BANKING…A Placement Perspective

 Branch Banking and Unit Banking

 Chain Banking and Group or Holding Company Banking
 Deposit Banking, Investment Banking and Mixed Banking
 The first private sector bank in 1994 was been setup by UTI
 Banking Regulation Act 1949 came in to effect in 16 March 1949.
 First Mobile Bank in India: Khargone (MP)

Some Major Establishments:

 IDBI: July 1964
 NABARD: 12 July 1982
 EXIM: 01 Jan 1982
 NHB: 09 July 1988
 RRBs: Under Regional Rural bank Act 1976
 IFCI: 1948
 ICICI: 05 Jan 1955
 SIDBI: 1990
 DICGC: 15 July 1978
 SBI DFHI: April 1988
 SHCIL: 1988
 ICRA: 16 Jan 1991
 CARE: 21 April 1993

Narsimham Committee Reports Major Recommendations’:

 Increasing profitability of Banks
 Uniform Accounting Policies
 Speedy Recovery
 Reconstruction of the Banking System

Heads of some Important Institutions:

 ICICI: Mrs Chanda Kocchar, CEO
 IDBI: Mr Yogesh Aggrawal, chairman
 Indian Bank: Shri TM Bhasin
 Bank of Baroda: Mr MD Mallaya, Chairman
 Union Bank of India: Mr MV Nair, Chairman
 PNB: Mr KR Kamath, Chairman

Mahendra K Patidar / PGDM BIF / 017 / IPE HYD Page 7

 BANKING…A Placement Perspective

 Yes Bank: Mr Rana Kapoor, MD and CEO

 Andhra Bank: Mr RS Reddy, Chairman and MD
 SEBI: Mr CB Bhave, Chairman
 IRDA: Mr J Harinarayan, Chairman
 AMFI: Mr U K Sinha
 NSE: Mr Ravi Narain, MD
 NSE: Dr Vijay L Kelkar, Chairman
 BSE: Mr Madhu Kannan, MD and CEO
 HDFC: Mr. C.M. Vasudev, Chairman
 HDFC: Mr Aditya Puri, MD
 SBI: Mr OP Bhatt, Chairman
 Allahabad Bank: Mr JP Dua, CMD
 International Monetary Fund: Dominique Strauss-Kahn, President
 Asian Development Bank: Haruhiko Kuroda, President
 United Bank of India: Shri Bhaskar Sen, CMD
 Bank of India: Shri Alok Kumar Mishra, Chairman

Mahendra K Patidar / PGDM BIF / 017 / IPE HYD Page 8